Question
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund,
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.4%. The probability distributions of the risky funds are:
| Expected Return | Standard Deviation | |
| Stock fund (S) | 14% | 34% |
| Bond fund (B) | 5% | 28% |
The correlation between the fund returns is 0.0214.
What is the Sharpe ratio of the best feasible CAL?
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
12th Edition
9780073526706
